Three years late on this, but I thought I'd go ahead and list this medium-term rental in Denver.
This was our very first purchase in 2015. We intended to use it as a primary residence for awhile. Instead, we found a new place in a year and decided to move out. We knew it wasn't going to cash flow a ton, but we thought Denver had more room to grow and decided to keep it for the appreciation. (Glad we did.) So to juice the rents as best we could, we furnished it and started renting it as a medium-term rental to traveling nurse types.
Details below the picture. (And more pictures of the unit at the bottom.)
An 800sf 1br condo in Capitol Hill neighborhood in Denver initially for our primary residence.
Purchase price: $188,000
Cash invested: $20,100
Initially, we put in $14,600 in down payment and closing costs. When we moved out, we spent $5,500 in furnishings.
What made you interested in investing in this type of deal?
We loved the building and the unit. It had a balcony and a dedicated underground parking spot love the ability to invest with cash flow and the ability to pull money out to move on to the next project.
How did you finance this deal?
Conventional loan w/ 5% down
How did you add value to the deal?
Didn't do anything until we moved out and then furnished it with what we'd like to think is an attractive style to the traveling nurse crowd.
What was the outcome?
About what we expected. We cover our mortgage plus about $75. But the real value has been in the appreciation we've accumulated in the last few years. (Not to mention tax write-offs and the principal paydown by our tenants.)
$1,795 -- average monthly rent
$1,570 -- PITI + furnished utilities
$90 -- 5% repairs
$62 -- 3.5% avg vacancy over the last three years
$1722 -- TOTAL costs
$73 -- monthly cash flow
Estimated sales price today -- $275,000
Appreciation since 2015 -- $87,000
Lessons learned? Challenges?
No huge lessons but some thoughts for sure:
- If we had known about house-hacking, we would have gone that route to start. I don't think we ever would have rented by the room, as Erin and I aren't interested in roommates and there are some things more important than cash flow. But we would have done a small single-family home with a lock-off basement that we could short-term rent on Airbnb. The cash flow would have been better while we were there and likely after we left as well.
- That said, I really believe your first "investment" should be your first primary residence. And this was certainly the case for us. We learned a lot about running numbers, leases, and handling tenants. We now have five doors between Denver and Colorado Springs.
- I still believe small spaces can do well in Denver. I just had clients close on a 600sf 1br unit in Capitol Hill that they're going to furnish and rent as a medium-term rental. The numbers will work there.
- Airbnb has been our best driver of business. Zillow does okay as well. So does Facebook Marketplace. Craigslist hasn't landed us a medium-term rental in two years.
- "Traveling nurse" is really short-hand for all kinds of renters. We've had summer interns, judicial clerkship recipients, people transferring to Denver and wanting a temporary space before landing permanently, and yes, some traveling nurses.
Here are some more photos of the place.
Nice work! The place looks great. I've wanted to do the blue cabinets on a project, but haven't yet. Are you guys going to hold on to it, or can you sell soon and avoid cap gains?
Thanks. We were pretty happy with it. I wish we could take credit for the blue cabinets. The previous owner did that.
The time to sell would be coming up if we wanted to avoid cap gains. We actually did that with a small condo in another building with a bad HOA. But this building's HOA and reserves are strong. We like Denver's long-term prospects. And we see options for this property when we retire in 20 years or so ... as part of our portfolio of cash-flowing properties, as a nice cash-out to go live elsewhere, or as a place to downsize to when we're decrepit.
@James Carlson - with AirBnB as your best driver of business, does that mean that your guests book for long periods through AirBnB? If so, for a medium term rental do you do any extra contracts to ensure compliance with CO rental statutes/appropriate security deposits, or are you satisfied with the terms/insurance/etc. through AirBnB?
This is a self-interested ask, since I might PCS this summer and we're deciding whether to long-term rent (unfurnished), medium-term rent (furnished), or, depending on how the Colorado Springs City Council goes, AirBnB STR.
Nice! I was a travelling healthcare professional when I came out here. We are now moving for 2.5 years for my wife's graduate school and we are planning to do the same with our condo. I'm happy to see it has worked out well with you! However, my HOA is not doing well at all so that's a huge worry. Good luck!
@Thadeous Larkin Snobby Denver hipster here. What'd you expect?
We set the minimum number of nights for stays on Airbnb to 90 days, which is the minimum required by our HOA. We also make everyone sign a lease outside of Airbnb. (And we disclose that to any interested parties before they book through the platform.) We used to try taking a deposit outside of Airbnb, but not surprisingly, the platform doesn't take kindly to taking any kind of transaction outside of the system. So we keep the deposit within the system, which isn't ideal because I don't have as much control. But I'm willing to take that for the extra exposure that Airbnb gives our rental.
I think a lot of people are waiting to see what happens with the Colorado Springs council. The meeting was cancelled today. Not sure yet when the vote will be.
Finding a condo building in Denver with a healthy HOA is hit or miss. I don't think a bad HOA is necessarily a deal-killer. It's just weighing how much any potential assessment for deferred maintenance will offset cash flow or appreciation. I hope the move goes well and the medium-term rental goes well.
@James Carlson - thanks, that's super helpful. Is there a way to exploit the algorithm so that it doesn't make the cost/night of the place seem so high when you're setting a pretty heft minimum number of nights?
The City Council meeting was cancelled due to weather because even God thinks the proposal is a stupid one and is trying to prevent it from becoming law.
Forgive me if I'm missing something in your question, but the cost/night should actually be lower because you're not going to charge short-term rental rates. (Ex. A 2br unit in a decent location might get $130/night as an STR in Colorado Springs, but you're going to charge $2,100/mo for it as a medium-term rental, so you're nightly is actually $70/night.)
We are in the process of trying to rent out our home in Las Vegas Medium Term, and this post was SUPER HELPFUL! We are currently listed on Furnished Finder, and AirBnB, but I will be looking into adding Zillow as well. Do you have a standard lease you use? We are having trouble finding a template. I just received interest on the property today, and thought through Airbnb, a lease wasn't needed, but now I am second guessing?!
That's good to hear you have some interest in your place. I have a lease that we use that I will share. I make no guarantees of its superiority, but I'm happy to share. (I'll PM you.)
About getting a signed lease, even when sourcing the tenant through Airbnb ... I hear mixed thoughts on this. We have Denver clients who bought a condo and operate a medium-term rental and get their tenants through Airbnb. They never use a lease and have had no problems. Even in the event of a problem, maybe Airbnb's agreement would suffice.
But without having read the agreement, I suspect it's not as tight as a lease. And I wonder if it would require arbitration, not court in the event they don't leave. I know that many of the problems you encounter with normal short-term renter guests have to be resolved through Airbnb's system. Or maybe it's that even though I'm only 38, I'm kind of old school and just want to have a paper lease with a signature.
Either way, I'd be sure to put the lease requirement in the listing description and mention it in any initial communication. Springing a lease on someone can make some guests from Airbnb suspicious. And rightly so. Transparency matters.
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